Imagine browsing online and getting all excited about buying goods. You order your new favourite pair of shoes. However, the shipment is arriving from outside the UK, and you must pay import duty and taxes. What now? How is import duty calculated?
Don’t worry. We got you covered.
After Brexit, some changes were introduced to UK customs, which confused many people. Do I pay VAT, import tax, or do I need to pay duties as a whole, and how do I calculate how much I need to pay?
This is why we will talk today about:
- What is UK duty?
- What is a GSP scheme, and how does it work?
- How are import duties calculated?
- How can Duty Refunds help you get the import duty back?
We promise it isn’t as hard as it may seem to calculate import duty, and we will show you how!
What is customs duty?
UK Duty is an added cost you must pay to HMRC besides your taxes. The value and type of goods you are importing into the country will affect how much import duty you will have to pay. Every product has a different duty percentage rate.
There are two options to calculate the percentage of how much you will end up paying for duty. Either contact the UK freight agent or calculate the duties by yourself using the UK government website online tariff calculator.
You can also use an online import duty calculator. It should break down the cost of duty, VAT, and the non-refundable shipping cost, depending on your chosen delivery service.
How the goods are described and classified will impact the value of duties. You would need to allocate them to the correct tariff heading, which will, in return, help you determine the overall cost of your UK duty.
A great example would be to try and calculate the shipment costs of shoes, gadgets or liquor. If you choose to order liquor or tobacco, excise duty will be applied and must be paid regardless of the value. Besides mandatory VAT charges, you will also need to pay the duties and shipping costs.
It is worth mentioning that UK duty has implemented an anti-dumping duty on goods such as bicycles, e-bikes, and solar panels, to name a few. This is only applicable when imported from China. If you want to see a complete list of anti-dumping duties implemented by the EU, we recommend you look on the HRMC website.
What is a tariff, and where can it be applied?
A tariff is a tax levied by the government. It raises the price and makes imported goods and services less desirable and competitive compared to domestic ones.
The UK Global Tariff (UKGT) applies to all importing goods unless there are trade agreements between the UK and the countries you are importing from.
A tariff suspension will be an exception if the goods come from developing countries covered by the Generalised Scheme of Preferences (GSP).
What is VAT?
The Value Added Tax (VAT) is levied on the value added to goods and services. It applies to all the goods and services bought in the UK, EU, and countries outside.
Before Brexit, VAT was included in the price for goods delivered from the EU or outside it. When ordering from the EU, and if the goods are manufactured in the EU, customs duty is £0. Still, the import VAT has been introduced besides regular VAT charges on all packages valued above £135.
Before Brexit, VAT was included in the price for goods delivered from the EU or outside it.
While import VAT is always 20%, regular VAT is not. If a business registers for VAT, then it must be paid. The cost will either be 20% (standard rate), 5% (reduced rate) or 0% (zero-rated). This depends on the classification of the sale according to the HMRC and how much you will end up paying VAT.
Import VAT will always be a part of the import duty and tax that must be paid. So you can always add 20% of the value to your total when calculating all the costs.
What are HS codes, and how do they work?
To put it simply, these codes are tariff codes. It is a list of numbers that the customs use to classify a product. On the gov.uk website, you can find the product category and commodity codes.
Whenever you import any goods into the UK, a customs tariff system code (HS code) will have to be used to calculate the percentage you will need to pay on import duty.
An example of the code would be you buying goods online. Let’s say the product category is pants. Those pants are made of cotton. You would need to, in that case, locate the code for apparel made of cotton plus what they are used for.
It is worth noting that you need the correct commodity code to apply to import and export. The main difference is in length. An imported shipment will always have a 10-digit code, while an exported shipment will have an 8-digit code set to change in the future.
What is a GSP scheme, and how does it work?
The GSP (Generalised System of Preferences) is a customs program that provides duty-free treatment for certain UK imports from an eligible developing country. If the products are imported from certain countries, this scheme will provide them with a lower or zero duty rate, meaning that rules of origin are applied.
This EU scheme allowed suppliers in developing countries to trade more efficiently worldwide.
How much duty you pay depends on the country exporting to the UK. The vast majority of suppliers covered by GSP will be able to provide you with a Certificate of Origin. When the goods arrive in the UK, this will show customs that the goods fall into the GSP scheme and that the duty rate is lower or not applicable.
How is import duty calculated?
To pay these charges, you first need to know how much is the import tax and duty. This can be done via a customs duty calculator and applies to all importing goods.
It is essential to calculate import taxes and duties because there can always be unexpected costs when it comes to imported goods, for example, if your parcel is detained.
Because we want you to save time and money, we will explain to you how duty and vat charges are calculated.
The duty and VAT charges, which are the two main costs that need to be paid, are applicable if the imported goods are coming from outside of the UK and EU only if:
- the charges are above £135
- you have ordered excise goods
If you are charged for the duty and VAT, you will need to pay it on:
- the price paid for the goods
- postage, packaging and insurance
You won’t need to pay for customs duty if you receive non-excise goods valued at £135 or below.
For a gift or shipment valued at £135 and up to £630, a 2.5% customs duty charge will be applied, depending on the goods. In some cases, it may be lower.
The rate for gifts or shipments above £630 will depend on the type of goods and where they came from.
We recommend you use our Duty Refunds customs duty calculator. It will also provide you with the non-refundable shipping cost depending on who delivers your parcel.
How to pay the import tax?
The easiest way to pay the import tax is through a courier. UK customs will provide the amount of duty and VAT payable to your courier. They will let you know the total value that needs to be paid and if any other taxes are included.
The declared value of the goods will impact the cost. The commodity code can also help as some products have a preferential duty rating when imported from a specific country.
How can Duty Refunds help you get the import duty back?
The easiest way to receive your refund is to return the ordered items to the retailer. When the seller issues the rebate, you must fill out the C285 form on the gov.uk website.
However, the process is long and complicated, and the wait time can take up to 6 weeks. Plus, courier documents are very confusing regarding the breakdown of the customs charges.
If your application for a refund is declined, customs usually won’t notify you. The rejection of an application often happens if you provide incorrect information; even a single letter out of place is enough.
This is why reclaiming import duty on returned goods has become our mission, and we guarantee we will help you get a refund in up to 3 weeks.
Reclaim customs charges with Duty Refunds
We have simplified the process of receiving a refund on your returned goods.
All you would need to do is fill out our form, provide us with your tracking/waybill number, and if you qualify, we will take it from there. Our team is comprised of experts on import VAT and duty refunds.
We will help you quickly and efficiently process your refund of import duty on returned goods in just three weeks.
Final thoughts
Hopefully, after reading this article, calculating import duty and VAT seems more straightforward.
Remember that customs charges apply only to goods worth over £135. If you have returned the goods, you are eligible for customs duty and import VAT.
Initiate the claim in just a few clicks and get help from Duty Refund experts.